Trump running out of ammo as trade war rages
As Donald Trump travelled to Japan and Britain gathering momentum and support to sink Huawei, his buddy Steve Bannon was running around the world telling the private sector that “Shutting down Huawei is 10 times more important than a trade deal with China”.
Now it appears that the trade war is just a ruse to divert the Chinese government’s attention. Trump has been treating the Chinese to a banquet: the shimmying belly dancer was a distraction, the crackdown on ZTE an appetiser, and Huawei is the main course.
On Sunday Beijing finally threw down its chopsticks and produced a white paper detailing the long and changing menu of demands made by America during months of trade negotiations. A long trade war now seems unavoidable. China’s soon-to-be released blacklist of companies and entities that have damaged Huawei’s operations could turn the tables, and any gestures between Trump and Xi during the coming G20 Summit in Osaka will be just protocol.
But how much firepower does Trump have left? The US economy, no matter how much Trump boasts, is not doing well at all! Rather than telling reporters as he left for Japan that China’s economy has weakened, he should have looked at America’s. The 10-year yield for US Treasury bonds has collapsed to 2 per cent, so far below its short-term rates that the inverted yield curve signals a coming recession. The Fed may give in to Trump’s demand and reduce the interest rate but it is unlikely to roll out another phase of quantitative easing as Trump wants. Investors will now be shunning the Treasury bond market which will further weaken the dollar.
Former British MP George Galloway, says that Bannon, a former US Navy officer “would be himself upon the Bridge of the first US gunboat up the Yangtze”.
Trump once stated, “Remember, China is not a friend of the United States” (Twitter May 19, 2014), though I doubt he is as extreme as Bannon. After all, Trump has an election awaiting him next year. But if the US stock market continues to fall, the president may find himself waking from a nightmare in the middle of the night and tweeting to the world that, guess what, he is finally ready to sign a deal with his good friend Xi the next day!
As for Huawei, well, let’s see if the dessert course is sweet or bitter.
Yingwai Suchaovanich
